The perfect investment is one that is cleary undervalued with an obvious
catalyst that's about to change perceptions and send it soaring, says Andrew
Oxlade.

The perfect investment is one that is undervalued on nearly every measure with an obvious catalyst that's about to change perceptions and send it soaring.

Such opportunities, of course, are hard to find.

Japan's stock market has a "book value" of less than one. This means that if you wound up all the companies, sold their assets and cleared their debts you would have more money than the total value of the stock market.

The US market, by comparison, has a more pricey book value of 2.27.

Other measures for Japan, such as prices against profits, also tick the box of a bargain market.

And then there's the catalyst. Japan's new prime minister, Shinzo Abe, has promised an aggressive economic policy and his bullish talk has already sparked a rally.

The Nikkei 225 index has risen by nearly 8pc in less than two weeks. From a near-term low in October it is up by more than 30pc. A bull market could be in full swing.

The bears of course will rightly highlight the long-term pain inflicted on those trying to catch the "falling knife" of Japanese shares. The Nikkei at a little over 11,000 today is a fraction of its peak of around 39,000 in 1989.

Japan's economic prospects are also questionable, given that the leadership is wrestling with the world's largest debt burden and has a rapidly ageing population that will less spend less and force the government to borrow more.

But Japan has dealt with these issues admirably so far and its hi-tech economy stands to benefit as global economic growth becomes more dependent on innovative industries.

The brave are betting that the sun is finally rising.

Whereas most of the major fund-selling websites are reporting little interest in Japan, Alliance Trust Savings tells me demand is rocketing.

The crucial difference between Alliance Trust and other fund websites is that it is very cheap for investors with large portfolios. Its customers are a sophisticated lot who tend to lean towards low-cost funds that track markets.

In January, Japanese fund buying was sharply up on December and four times the level seen a year ago. Exchange-traded funds (ETFs) – low-cost baskets of shares that aim to track an index – were particularly popular.

The iShares MSCI Japan, which charges less than 0.6pc a year, was the top selling ETF. Aberdeen Japan Growth, where shrewd stock selection has steered the fund to a three-year return of 33pc, easily beating its peer group average of 13pc, was also in demand.

Should you follow the bulls at the front of this herd?

Arguably, there are more exciting opportunities elsewhere. Adventurous investors are looking to the young populations of Africa, Indonesia or Turkey to deliver exciting growth for their countries and those who invest in them. But measured against other developed markets, Japan may finally deserve a small place in your portfolio.

It ticks the box of buying low; the question is how long it will take until you get a chance to sell high.

Sales of Japanese-focused investment trusts. Source: ATS

SECOND HOMES: CLARITY TAKES A HOLIDAY

What do you need to do to avoid a large inheritance tax liability on your holiday home? That's the new headache faced by many owners of country cottages this weekend, following a court ruling (see right).

It comes down to whether your property is viewed as an investment or a business offering "services". Previously, a service could be cleaning the property or offering a delivered newspaper, now it's less clear. "Maybe you need to dress up in a tiger suit and entertain your customers' kids," said John Endacott of accountants Francis Clark. "In reality, people who go self-catering want to be left alone."

For the sanity of the estimated 100,000 second home owners who may be affected (and perhaps for their holidaymakers too), clarity is essential. HMRC, please oblige.